About Photovoltaic solar power generation income tax
There is a special exemption for householders first announced in the pre-budget report 2009. Under this exemption the tariffs received for energy produced under the FITs (both the generation and the export tariff) are exempt from income tax provided that the households: use renewable technology to generate electricity.
There is no equivalent exemption for business users, who therefore have to declare the income from FITs installations as part of their taxable revenue. Companies.
Some types of renewable energy installation were available for Enhanced Capital Allowances (ECAs), but the Treasury intends to remove all technologies.
Tariff-eligible installations can be undertaken by companies supported by Venture Capital Trusts (VCTs) or financed under the Enterprise Investment Scheme (EIS).
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6 FAQs about [Photovoltaic solar power generation income tax]
Are solar panels taxable?
Often the electricity is used by the business operating out of the property with excess electricity bring sold to the National Grid. Any receipt from such a sale is taxable. Tax relief is available on the cost of production including the capital costs of installing solar systems.
What is solar photovoltaic tax relief?
Since 2012 solar photovoltaic systems have been classified as items which attract an 8% annual writing down allowance tax relief. Also since 2012 the rate on which allowances can be claimed for any asset generated income under the feed in tariff is 8%. This compares to rates of up to 18% for tax relief on assets in other industries.
Is a sale of a solar system taxable?
Any receipt from such a sale is taxable. Tax relief is available on the cost of production including the capital costs of installing solar systems. The typical installation has a reasonable set up cost and then generates income which has low cost of production.
Do I have to pay income tax if I generate electricity?
Where the generation tariff is received by an individual, other than in a business capacity, and it is not chargeable as miscellaneous income, no Income Tax liability will arise. This will usually be the case where an individual generates electricity mainly for use in their own home.
Is a generation tariff liable for income tax?
A generation tariff received in a private capacity, which is not chargeable as miscellaneous income, will not be liable to Income Tax but the reduced cost of electricity should be reflected in the cost of electricity attributed to business use. An export tariff is payable for electricity exported to the wider energy market.
Are domestic electricity installations tax-free?
Given that broadly, a standard size installation may contribute only up to half of a family’s annual electricity requirement, it is expected that the vast majority of domestic installations will enjoy tax-free income.
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